Collateralized debt obligations (CDOs) are the notorious debt instruments that wreaked havoc during the crisis.
Wells Fargo (NYSE: WFC) has agreed to pay a fine of USD11m to settle charges that its unit, Wachovia Capital Markets, had priced two
collateralized debt obligations more than what they were worth.
Joe recommends prohibition of the
collateralized debt obligations that turned out to be a major factor in the Wall Street meltdown of 2008.
Judging by its content, the securities losses are related to such alphabet soup investments as ABS (asset-based securities), CDOs (
collateralized debt obligations) and CMOs (collateralized mortgage obligations).
He depicts how the risk of 2,393 subprime loans, with a face value of $430 million, was turned into high-grade investments with the help of "special purpose vehicles," and then
collateralized debt obligations, or CDOs.
Tom Pope's April 1 article, Mortgaged-Backed Investments Threaten Nonprofits, attempts to describe the risks nonprofit managers face when investing in collateralized mortgage obligations and
collateralized debt obligations, especially in the wake of the current credit crisis.
Some types of discounted debt instruments include corporate bonds, municipal bonds, certificates of deposit, stripped bonds, and
collateralized debt obligations. There are a number of debt instrument exceptions to the OID rules.
N-Star VIII is collateralized by commercial real estate loans (91.9% of pool), mainly subordinate debt positions, as well as commercial real estate
collateralized debt obligations (CRE CDOs; 8.1%).